So, this is a silly question but I keep getting mixed answers. If I have insurance with a company like Genworth, should I be worried. If stock is @ 1, and say they go to bankruptcy, are the policies still good, etc? I have some non Wall St people worried that if company blows up (invests in poor instruments, etc), it means they cant play claims etc and they will lose policies? I doubt this is true…
here is email from ins agent: -------- Genworth did in fact get some very bad press on Tuesday of this week. The state of Texas is investigating their marketing efforts, and with that their stock plummeted. However, Life Insurance is still backed by bonds with each state they do business in. Which means policy holders claims are always paid ------ IS HE RIGHT?
He is partly right. Insurance companies are heavily regulated at the state level. There is something called “The State Guaranty Funds” that come into play once an insurance company goes bankrupt. Every state has its own limit. Depending on the type of product (annuities, life policies, GLB’s, etc) the limit will be set. I think most states have a maximum guaranty of $100k to $300K per product. Google “The State Guaranty Funds” for more in depth answer.
my business partner used to be an insurance officer manager. He said that some of the newer, more esoteric life insurance products might take longer to be processed by the state guaranty funds, but that they will most likely also be covered up to the state limits. In most states the funds for covering insurance payments are treated like third-party trusts and are not accessible to creditors in the event of insurance company bankruptcy.
Remember also that state guaranty funds pick up after liquidation of the company’s assets. If you have something complex and you die the day the company goes bankrupt, your heirs will have more difficulty than you planned but should get paid unless you have some gigantic policy or something.